Crosscurrents Issue 3

Virtual Power Plants: Every Home and Business in Every City and Town Can Now Contribute to “The Grid”

Conjure up the image of a power plant generating electricity for our homes and communities. Perhaps you’ve pictured a building with tall smokestacks, or a wind turbine, solar array, hydroelectric dam, or nuclear plant.

All power plants—in whatever form they take—are part of the electric grid. So too are the transmission lines, utility poles and equipment needed to bring electricity from where it is produced to where we live and work

That is how we think about the electric grid: as an incomprehensibly vast connected web of equipment that we are tethered to by the wire that is slung between the nearest utility pole and our electric meter. With the advent of internet-enabled thermostats, rooftop solar, battery energy storage systems, heat pump hot water heaters, and other devices like EV chargers, however, our electric meters no longer represent a boundary that separates us from the active workings of the grid. Now the grid’s edge extends right into our homes. Your house, and every building in your community and around New England can now serve as a contributing, component part of the electric grid. Every home or business, just like a conventional power plant, may now serve as a grid asset.

The integration of our homes and businesses into the grid is made possible via virtual power plants (VPPs): assemblages of the devices we all individually own and will increasingly adopt. When they are combined, they can equal hundreds of megawatts of electricity, and can participate in the region’s wholesale electricity markets on an equal footing with other energy resources.

The reward for electricity customers who participate in VPPs – sometimes referred to as ‘Bring Your Own Device’ programs – is that they are compensated for allowing their devices to be used as grid assets. VPP aggregators, which include utilities and other third parties, are responsible for handling device enrollments, managing performance, and receiving revenues from the wholesale electricity markets. Electricity customers, including municipalities, are paid for the VPP services they provide.

An example of the important role VPPs play balancing the supply of power against demand came last August 1^st. On that day, a series of cascading events caused the demand for electricity to exceed available supply. First, temperatures were higher than forecasted, and this resulted in higher demand for electricity than had been predicted. Then, at 4:44 p.m., a 335-megawatt (MW) gas-fired power plant tripped offline. After that, an additional 400 MW of unscheduled power plant outages and power reductions occurred. The region’s grid operator, ISO New England, took steps to bring available electricity supply back into balance with electricity demand. This included activating VPPs to reduce demand. Conservation measures, including the contribution from VPPs, reduced system demand by 350 MW—an amount that exceeded the total generating capacity of the methane gas power plant that had originally tripped offline. The ability of VPPs to help re-balance the grid to avoid power outages had been validated once again. VPP participants—individual electricity customers—had successfully provided services to the grid that had originally been designed solely to serve them.

The benefits VPPs provide are not limited to emergencies like August 1^st. VPPs will play a growing role in providing day-to-day and long-term environmental and financial benefits to all electricity customers, not just the customers who have enrolled in VPPs.

For example, VPPs can be used to reduce daily demand peaks—those hours of the day during which power demand is greatest. Because the capacity of the distribution and transmission grids is maximized to serve those hours of peak demand, any reduction in the peak will also reduce the number and cost of investments that are needed to accommodate it. The magnitude of potential avoided grid investments is enormous. Readers of Crosscurrents will recall [link to  Crosscurrents #2] that in its 2050 Transmission Report, ISO New England estimated that the region may have to spend as much as $26.25 billion over the next quarter century to upgrade the region’s transmission system to accommodate peak demand in 2050.

There are near-term savings to be had too. Reducing daily demand peaks and shifting demand to non-peak hours reduces the number of power plants that must be dispatched during hours of maximum demand. This reduces energy costs for all electricity customers, not just those enrolled in VPPs. VPPs can reduce our reliance on oil and methane gas “peaker” plants that are dispatched by ISO New England to meet spikes in electricity demand, resulting in health benefits to everyone, especially those living in closest proximity to peaker plants.

The lower costs and short implementation times of VPPs qualify them as some of the most readily adaptable and flexible grid resources. Their unique qualities are indispensable to a grid rapidly adapting to the increasing demand for power needed to electrify heating and transportation.  VPPs also yield comparatively high dividends in comparison with their relatively low deployment cost. For example, for every program dollar spent in 2020 on the “Connected Solutions” VPP program–offered by Eversource, National Grid, Unitil, and Cape Light Compact in Massachusetts, Connecticut, Rhode Island, and New Hampshire—yielded $2.14 in benefits for residential customers and $4.18 in benefits for commercial and industrial customers.

The true potential power of VPPs is inherent in the power of numbers, and to date here in New England, the rate of participation in VPPs remains relatively low. Together, Eversource, National Grid, Unitil, and the Cape Light Compact serve millions of electricity customers, yet enrolled VPP participants number slightly more than one hundred thousand. Participation in VPPs has the potential to be increased by an order of magnitude, and when they are. they will be ranked among the region’s most significant indispensable grid resources.

To fully realize the potential of VPPs, program designers, state regulatory authorities, local electric distribution utilities, and ISO New England all need to expand VPP programs, including making VPP enrollment an opt-out (rather than an opt-in) alternative. Public utility commissions can require local utilities to incorporate new categories of VPP devices, compensate utilities for successful program integration, and open participation to third party providers. ISO New England can integrate VPPs into their long-term planning to address grid bottlenecks, respond to unexpected increases in electricity demand, and maximize the utilization of renewable resources.

These are but a few of the regulatory, legislative, and market solutions that can optimize the potential of VPPs while allowing VPP owners to benefit financially from their contributions to the grid.

Fulfilling the promise of VPPs must be a common goal for the region, which is entirely fitting—VPPs, after all, are themselves the embodiment of the power of collective action.

Opportunity for Municipalities to Attend Quarterly ISO-NE Consumer Liaison Group Meetings

Like all ratepayers in the region, New England cities and towns are able to attend ISO-NE’s quarterly Consumer Liaison Group meetings, held virtually and in person. Register online for the next meeting on December 4, from 12:00pm to 3:00pm. The following meeting will take place in Rhode Island in March 2025.

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